Employment law- Notice
What is the minimum notice that you must receive from your employer?
Notice is usually specifically agreed with your employer, and this would usually be part of the terms of your contract of employment. There are, however, statutory minimum notice periods which apply in any event- regardless of whether your contract of employment provides for a lower notice period. These minimum periods are based on the time that you have worked with your present employer:
- if you have worked between 1 month and 2 years – 1 week’s notice is required from your employer;
- if you have worked between 2 and 12 years – you are entitled to 1 week for every year worked up to a maximum of 12 weeks.
For example, if you have worked for 8 years, in the absence of any contractual provision, or where your contract provides for less than the statutory minimum, you would be entitled to 8 weeks notice.
Don’t forget that the above minimum periods are just that- a “minimum”. If your employment contract provides for a notice period higher than the minimum, then you should be entitled to receive that notice at the higher period.
An Employment Tribunal can order that you should be entitled to more than 12 weeks notice because it is “reasonable” in that particular industry. For example, it may be that for senior managers in a certain sector, the usual notice periods are 6 months. It is rare, however, for a Tribunal to make such a finding.
If you are not paid in accordance with your statutory minimum notice period or contractual notice period, you may have a claim for breach of contract, otherwise known as “wrongful dismissal“.
What is the minimum notice that you must give to your employer?
Usually, the contract of employment will specify what notice period you should give if you wish to resign your employment. This can be varied by agreement.
If the contract is silent, the statutory minimum period of notice where you have been employed one month or more is 1 week. You can give notice verbally or preferably in writing (an email would suffice). This is to stop any subsequent dispute as to whether notice was, in fact, given.
A much longer notice period may, however, may be implied if it is reasonable in all the circumstances (i.e. what is normal for a person of that seniority and in the industry).
What are your payment rights during your notice?
You are entitled to receive your normal pay during your notice period, as set out in your contract of employment. This includes any time that you are off sick (assuming you are entitled to sick pay), on holiday or maternity pay. You are also entitled to be paid when you are available for work, but your employer does not provide you with any.
What if you wish to give less notice than what your contract provides for?
If you wish to leave before the end of your contractual notice, there are realistically not many remedies available to your employer. You cannot be forced to work as a matter of law, even though you may be in breach of contract. In certain circumstances, an employer may be able to obtain an injunction to stop you from working at a new employer during your notice period. Your old employer would have to show that your new employer is a direct competitor, and that there is a legitimate business interest to protect- this is not always an easy task. It is usually only worth an employer to consider bringing any such claims against senior executives.
You may also be sued by an employer for the additional costs arising from the breach of contract, i.e. the cost of replacement staff for the balance of your notice period. In the most serious cases, a claim could further be made for lost business arising from your breach. Again, such claims are very rare and likely to be brought against senior personnel only.
If you give less notice than you are contractually obliged to give, your employer may try to withhold pay due to you for the time that you have already worked because of this incorrect notice. Employers are generally not entitled to make such a deduction unless this is provided for in your contract of employment.
What are your rights to still receive salary and benefits during the notice period?
You are entitled to receive your normal pay and benefits during your notice period, as set out in your contract of employment, assuming that you are still working or are on garden leave. This includes PHI, pension or car allowance any time that you are off sick (assuming you are entitled to sick pay), or on holiday or maternity, paternity or adoption leave. If your employer decides to pay you in lieu of notice (known as “PILON”), you may not receive all your benefits (see below).
Are you still entitled to receive your bonus once you give notice?
What about stock options, restricted stock and deferred compensation?
Your employment contract should set out how long you need to have to stay with your employer to realise your stock options. If you have already exercised the options, these cannot usually be taken away from you. If you have not exercised them, it may be possible to negotiate whether you can still realise any of the value of those options.
If you leave employment prior to the date your Restricted Stock Units vest or are fully distributed, you often then forfeit your units. You need to check your employer’s plan for details of what the position may be.
You should also check what the position is regarding any deferred bonus, especially in relation to the unvested value, when it will vest and when the deferred payments will be made.
What is Pay in Lieu of Notice (or “PILON”)?
This is where you are paid for your notice without having to work it. This is often referred to as “PILON” ( pay in lieu of notice). More often than not, there is a PILON clause in your contract of employment, which gives a discretion by your employer to terminate your employment immediately pay you in lieu of notice- in whole or in part.
Most contracts of employment expressly provide that there is no entitlement to be paid for benefits such as car allowance, pension, or private health insurance where you are paid in lieu of notice. In other words, you receive just your base salary. If the contract is silent on this point, however, or you are paid in lieu of notice when your employer has not reserved the right to do so, then your benefits should also be paid.
If you are dismissed by your employer without notice, and you do not have a PILON clause, this is a breach of contract (even if full compensation for the notice period is paid). This means any post-termination restrictions in your contract of employment will no longer apply.
What are your rights if my employer pays PILON in breach of contract?
Where you have no PILON clause in your contract of employment and yet your employer decides nevertheless to pay in lieu,this is technically a breach of contract by your employer. Accordingly, such a payment represents damages for breach of contract and your employer should therefore include other benefits that would have accrued during the notice period, such as pension rights, health cover and holiday pay, to put you in the same position that you would have been in if you had worked your notice.
If you have restrictive covenants in your contract of employment, you are usually released from such covenants where your employer pays you in lieu of notice without having reserved the right in your contract. You should, if possible, take proper legal advice first before relying on this.
What are your rights to notice whilst you are on long term sick leave?
If you have normal working hours, you are entitled to be paid your normal hourly rate during any part of your statutory notice period (1 week for every year worked up to a maximum of 12 weeks). This includes where you are incapable of work because of sickness or injury.
Therefore, if your employer is only required to give you the statutory minimum notice under your contract, you are entitled to receive full notice pay for that period of notice, regardless of whether you are on sick leave. This applies even if you have exhausted your statutory entitlement to statutory sick pay and have been on sick leave for a long period of time.
There is an exception, however. If your contract of employment obliges your employer to give notice which is at least a week more than the statutory minimum notice period of 1 week for every year worked, your employer does not then need to make any payment during the notice period. For example, if you had been working for 5 years and your contractual notice period was 12 weeks, you will not be entitled to any pay during your notice period if you were on sick leave.
This means you will be better off if you are only entitled to receive statutory minimum notice (or your notice does not exceed the statutory minimum by more than 1 week- although it is fair to say that many employers are not aware of these provisions, so they may need to be put right.
What is garden leave?
You may be asked not to attend the workplace during your notice period, even though you continue to be paid. This is known as “garden leave” and you are expected to stay at home and not commence other new work for the balance of your notice. You are still, however, subject to the terms of your employment contract such as confidentiality, and you may be obliged to return work for all or some of the garden leave period at your employer’s request.
Whilst you are on garden leave, you are still entitled to full pay and any company benefits, including bonuses. At the same time, however:-
- you may be required to take any outstanding annual leave;
- your employer may request that you refrain from contacting any clients, customers, suppliers or contacts of the employer without their prior consent;
- you may be prohibited from working elsewhere or commencing employment with a new employer or on a self-employed basis.
Garden leave is something many employers are keen on, especially where you are a senior executive with important client contacts and confidential information. Putting you on garden leave takes you out of the equation for the period of your notice which means you cannot contact clients or colleagues for this period. This is how it protects your employer. At the same time, you also have to be on standby in case your employer still requires all or part of your services for the garden leave period.